December 15 Advance Tax Cut-Off Nears: What You Must Pay

December 15 is an important date if you are paying advance tax. In case you miss the deadline, you are liable to pay interest.

Advance tax is paid where the tax liability exceeds Rs 10,000, after deducting tax at source (TDS). “Where the tax liability for any assessee exceeds Rs 10,000 after deducting the tax deducted at source (TDS) credit, such assessee is liable to pay advance tax,” says Mrugakshi Joshi, advocate, DM Harish & Co.

“However, a resident senior citizen of the age 60 years or above and not having any income from business or profession is not liable to pay advance tax,” says Apeksha Lodha, partner, Singhania & Co.

Advance tax has to be paid in four instalments during the financial year. Taxpayers, including individuals, companies, firms, and others, must pay at least 15 per cent of their total tax liability by June 15. By September 15, the cumulative payment should reach 45 per cent, and by December 15, it should be at least 75 per cent.

The final instalment is due on March 15, by which time the taxpayer must have paid the full 100 per cent of their advance tax liability.

What Happens If You Do Not Pay Advance Tax On Time 

If you do not pay advance tax on time or pay less than the required amount, the Income-tax Act. 1961, imposes interest, not a 'penalty.’

“The interest is charged u/s. 234B and 234C,” says Joshi.

There are two instances possible in this case.

Interest u/s. 234B: For Not Paying 90 Per Cent Of Total Tax Before March 31

Interest is charged at 1 per cent per month (or part of the month) on the outstanding tax amount, from April 1 till the date of payment, if (i) you did not pay advance tax at all, or (ii) you paid less than 90 per cent of your total tax liability by 31st March.

Interest u/s. 234C: For Delayed Instalments

Interest is charged at 1 per cent per month if you miss any instalment deadline, and if you pay less than the required amount.  Interest applies separately for each missed or short-paid instalment.

For instance, if you miss the June 15 instalment, the law counts a fixed three-month delay. So interest equals one per cent × three months × the unpaid advance tax amount.